Value gap lends equities support

The value gap between bonds and shares is rapidly narrowing (“Switch is on from bonds to shares", AFR, January 29). Much of it is short covering in equities. Australian bond investors are earning a mere 2.8 per cent on five-year commonwealth treasuries.

Understandably bond investors are beginning to peer over the fence at the 4 per cent plus dividend yields as well as the prospect of further capital growth.

Ultimately it is the long-term trend in company earnings that share prices orbit.